The ATO has recently announced that it will resume collecting aged debts by offsetting tax refunds or credits. Aged debts are a collective term the ATO uses to refer to its uneconomical non-pursued debts that it has placed on hold and has not undertaken any recent action to collect. These debts do not typically show up on the online accounts of the taxpayers as an outstanding balance, as the ATO has made then “inactive”. Whether you pay business tax in Melbourne or personal income tax elsewhere in Australia, Alexander Bright details what to expect if you have an aged debt with the ATO.
Usually when a debt is put on hold, the ATO notifies the taxpayers via a letter that the debt collection has been paused and that any credits that the taxpayers are entitled to will be offset against the debt. In addition, the ATO will also note that it reserves the right to re-raise the debt in the future, depending on the circumstances of the taxpayer. Letters were sent out in May 2022 to remind taxpayers that they have aged debts, and June 2022 will see the recommencement of debt collection.
While most taxpayers should have received their aged debts letter by now, some may not have received anything due to a change of address or the patchiness of the postal service. The first clue for those taxpayers that they may have an aged debt may be when they notice that their refund is less than expected, or a credit on one account is less than it should be. To avoid surprises, taxpayers who are unsure whether they have aged debt can check their online services for a transaction with the description “non-pursuit” on their statement of account.
Taxpayers with aged debts who are unable or choose not to pay all or part of the debt may find that they end up paying more, as general interest charges may be automatically applied even though the debt is “on hold”. Where the ATO offsets aged debts either from ATO accounts or credits from other government agencies, taxpayers will be notified that the debt has been re-raised and offset. If it is offset against an ATO account, taxpayers will be able to find a transaction on online services with the description “offset”.
By law, the ATO is required to offset credits against any tax debts owed except in some very limited circumstances, such as:
Taxpayers that do not meet the above criteria and are unable to pay the debt may be able to apply for a review or a debt waiver depending on their circumstances. For example, a permanent release of a debt may be available on the basis of serious hardship (i.e. where the payment of a tax liability would result in a person being left without the means to afford basics such as food, clothing, medical supplies, accommodation or reasonable education).
Not sure whether you have an aged debt with the ATO? Alexander Bright can help you find out and work with the ATO on your behalf to find the most optimal solution to either repay the debt or apply for a waiver, helping to prevent interest charges from building up. Contact us today to benefit from our personal accounting services or business accounting services in Melbourne.
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